The Rupp Report: You May Call It Faith

January 20, 2015

Every mutual agreement is based on confidence, trust or faith in your partner. This is the case for business deals as well as for deals in the private sector. Even if your are sure you will buy model X as your next car, if you don’t trust the salesman you will not buy anything and will walk out of the shop. This is even more the case in the modern money world. Since it became common sense to gamble on stock exchanges, some more serious people are looking for a safe haven for their money.The World Is Upside Down
In times of modern and globally connected communication, information on everything is available on the Internet or elsewhere. Institutions, banks, and people with a lot of money, are carefully watching exchange rates for the most important currencies in order of the importance of the markets — the US Dollar, the Euro, maybe the Chinese Renminbi and the Japanese Yen. These countries, except China, are partners in the G8 group. So, if one lives in one of these countries, and has trust in his own financial system, he will leave his money in the banks of his own country.

Investors are carefully watching the whole economical and political situation in a country — the list of things to take into consideration is rather long — but stability is probably one of the most important issues. But if one has concerns about stability, he wants to find a more secure place and starts looking for a safe (money) haven. There are a lot of other countries besides the G8 members that have not the same sometimes questionable economical situations and governments.

Typically, Switzerland has fulfilled all the desired banking requirements and the old fairy tale says that every Swiss citizen is a rich citizen. And, dear reader, as a Swiss, the author of this report can assure you the fairy tale is not true at all. But since the Euro was introduced in Europe, a lot of money came into the Swiss banks, which led the US Dollar and particularly the Euro to weaken. In 2011, the Euro was under so much pressure that it lost 25 percent of its value compared to the Swiss Franc, and the Swiss National Bank (SNB) was forced to support the currency with a fixed exchange rate at CHF 1.20 to 1.00 Euro over an undefined period of time. And now the surprise after three years …

The SNB cancelled the Euro minimum exchange rate of CHF 1.20. With the abolition of the minimum price, the SNB has changed its monetary policy because of an increasing divergence of the major currency blocs. SNB President Thomas Jordan said that he could only announce the end of the minimum rate policy at once. Otherwise this would have been an invitation to insider trading.

The abolition of the minimum exchange rate is for some sectors a terrible shock. However, as Jordan said, the overvaluation of the Swiss Franc has decreased since the introduction of the minimum exchange rate in September 2011. On the other hand, the domestic economy was able to use the three and a half years of a planning security to take measures for a time after this period. Jordan said that it was clear from the beginning that the minimum rate was a temporary measure that would not continue endlessly.

The Message
There are some more facts involved, however, this is not the basic message of this Rupp Report. The message is that faith and confidence are still the essence of every prosperous industry. And despite troubles and losses of an estimated 500 billion Swiss Francs for the domestic industry, the SNB president is convinced that the domestic industry will face these severe problems and find solutions for a positive future. “Switzerland is now in a much better shape; the export figures, economic growth and an employment rate of some 3 percent are positive,” said Jordan. “The economy had its time to adapt to these conditions and the minimum rate has stabilized the economy. But now we are in a different situation and the SNB cannot meet all requested conditions at any time. It is better to realize that at the right time as to generate a much bigger shock later.” Strong words.

But it means he has faith and confidence in the domestic industry. Sometimes people from outside Switzerland are wondering about the ongoing success of such a small country with such an expensive cost of living and high wages. The reasons are no secret, here’s just a few hints: mind your own business; be a reliable partner to all your business partners; don’t accept second best, whatever that may be; use your brain and hands and don’t talk, do it.

See For Yourself
Jordan said that “Postponing the decision into the future would not have been less uncomfortable; it would even generate more severe side effects. Finally, Switzerland is not a monetary paradise where high interest rates for savers, a low Swiss Franc for the export sector and the absence of risks can be brought together at the same time forever.”

Conclusion? Help yourself, and don’t rely on other people. As the late U.S. president John F. Kennedy once said: “Ask not what your country can do for you — ask what you can do for your country.”

Let’s hope that all exhibitors at the forthcoming textile machinery events will go there with such a spirit of honesty and confidence. Because despite all positive thinking, the job must be done first. To be continued …